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Thursday, 11 July 2013

MVNO Conference 2013 Rome LTE MVNO opportunity

I though I would share my slide and thoughts on LTE and the MVNO, having written many of the requirements, negotiated a major full MVNO with LTE and now building the full LTE MVNO, here in the UK for yet another FTSE 100 company entering mobile.

The Opportiunities for LTE in MVNO and LTE wholesale are huge

I feel in a strong position to talk about the opportunity because I have negotiated a lot of MVNO agreements over the last 10 years across mostly Europe, which has seen the advent of 2G MVNO and 3G MVNO and its contractual, organisational and other issues. Also because at Virtuser we run a lot of value added services for MVNOs, like top-up over SMS and OTA data settings for MVNOs so we see what handsets are being used, what data propositions are being used and other first hand experience of not just walking the talk, but walking the walk, to use the consulting analogy (consultants are often accused of only being able to talk the talk, or at most talk the walk :))

In assessing the LTE MVNO opportunity, we need to look at the facts, not 3G+

Its important that we look at the facts when assessing the LTE opportunity and not make the 3G mistakes, not only on the commercial proposition side, but also from a network and business side. That is: its clear that 4G handsets are slower in uptake than 3G, and that so far this service, as such, commands a premium over 3G. We also know that data currently represents high double digits percentages of network running costs (87% in the case of a major MNO in the UK) but no where near these levels of revenues. We also know that while mobile data costs in the region of 5X the cost to provision, it does not command a yield price 5X that of fixed broadband data due to strong competition on the MNO retail market... Wholesale therefore is a significant opportunity for MNOs and MVNOs to charge the higher yields and returns to MNOs and MVNOs alike in this space. This will require the MNOs, and their notorious contracts to adapt and enable all new MVNOs with "4G ready" status.

Please can we not see MVNOs still launching with 3G SIM cards 7 years from now like with 3G

I was still negotiating 2G SIM card deals for MVNOs in 2007, 7 years after 3G! All new MVNOs should be 4G ready MVNO or LTE ready MVNOs, however you wish to call this. This means 4G MVNO SIMs, but also 4G LTE MVNO on the MNO roadmap, in the commercial contracts and support services.

4G has had a lot of marketing spend and will be big, but a 4G MVNO campaign does not need huge spend

A lot of marketing money has been spent on 4G and it will be big, but that does not mean 4G MVNO marketing needs to be big. Sure, EE has spent tens of millions, if not hundreds, on Kevin Bacon on prime TV ATL campaign... but they also launched #OM4G around the social networks and hit exactly the same audience for the cost of a couple of your marketing execs and some creative freedom free of corporate risk constraints (unlikely in an MNO :)) Data MVNOs like Bliep* launched and grew almost entirely on Twitter. Cheap marketing and a niche = low SAC, the mainstay of wholesale. add the fact that MVNOs are generally attracting a higher yield for their data and we have an ideal scenario for 4G to pull us out of the 3G hell we have, where heavy competition and unlimited packages mean 5% of the users are using 95% of the data and nobody can get a fast connection when they need it, reliably at least.

Clever Twitter and social marketing by MVNOs that is too risky for MNOs can hit at core 4G data market with low SAC

So the dawn of clever MVNO marketing is already here, and shifting the focus of MVNO marketing spend from being like MNO spend (mainly ATL with some dabbling elsewhere) to very experimental, experiential and social marketing... exactly what internet savvy 4G target market consumes. So no need for an overcomplicated six degrees of separation to attract a market and generation who are more 4G aspirational than 4G ready.

So you got past 4G and LTE contractual, MNO roadmap and other issues: is your MVNO platforms operationally ready?

Many MVNOs today have 3G, however nobody uses it as they are obsessed with competing with MNO bundles. The fact is that 50% of UK smartfone users use less than 100mb of data, and the rest use around 200mb. That means that by paying as much as 5p to 10p per megabyte on an MVNO, these users will be better off than getting an unlimited MNO tariff. What is more, the host MNO is better off, as retail yields are around ten times less than this. The MVNO is better off, as these data revenues are what shifts MVNOs form what I call a "£10 minus ARPU MVNO" to a "£10 plus ARPU MVNO".

The key issues around negotiating LTE MVNO and getting an MVNO 4G ready

The back-end is still critical, even the slickest MVNO architecture from tier 1 providers does not come with the back-end to enable MVNO friendly OTA and APN data settings, some of them incur up to 50% of customer care calls, which at an average of around £4.50 cost to an MVNO of a customer care call today, can easily wipe out the increased ARPU from data, and even all the profit from a user. Finally, the proposition needs to work. From running the SMS tariff top-ups form MVNOs we have great insight to the propositions MVNO customers actually buy, and they are very different from what most MNO propositions are, and a world away from the tizzy that MVNO management and proposition consultants can whip themselves into.